Brace for Impact: Global Financial Crisis May be Just Around the Corner

Author: Jean Perier

Column: Economics

Region: USA in the World

The cyclical nature of the world economy, when every single decade ends in a major meltdown of the world financial results in a number of experts predicting a global crisis to take place in 2019.

Everyone remembers the crisis of 2008, from which the West hasn’t fully recovered as production levels across the Western states still remain below the level shown in 2007. For the point of view of an impartial bystander, it’s rather hard not to point out that most countries would be borrowing cheap money at breathtaking rates in a bid to stimulate consumer spending. The problem of a wealthy lifestyle some still enjoy these days on borrowed funds is that it doesn’t solve any issues, it just delays the inevitable. In the end, all the printed money will flow back down to the stock market and the bubble starts to deflate. And where do we go from here? The only thing the West is still producing these days are shale hydrocarbons and even those are hardly profitable.

Of course, some businesses will go bankrupt, which will in turn trigger an aftershock of even more bankruptcies. Then the behind-the-scenes firefighters will start covering the whole mess with even more cheap money. Sadly, this time around Europe won’t be able to trim the fat, as there’s none left. AS for the US, it’s been desperate to get one last breath before getting submerged underwater with zero interest rates. And again, over the last couple of years Trump would start trade wars left and right, as if there was no tomorrow. It seems that this time we are about to learn just how deep the rabbit hole goes.

The word “crisis” itself is Greek and can be loosely translated as “the turning point” or “judgment day.” The crisis is the price all of us are about to pay for investing the money we don’t own in depreciating asset that we don’t really need or want. It would be naive to think that the rich will become poorer during the crisis, as the crisis itself is nothing but a tool for the redistribution of capital.

As a matter of fact, the World Bank is convinced that should expect a new global financial crisis to come upon us in the nearest future. This was stated in the report titled Global Economic Prospects, Darkening Skies, which states that the year 2019 may easily become a turning point to the world economy against the backdrop of the slowdown of the world economy.

Today, there are too many factors that can make the matters even worse than they are now. Of course, the leading among those is the over unpredictability of the Trump administration as it’s seems a bit too willing to turn its back on the previous international commitments of the United State, be it the unilateral withdrawal from the Iran nuclear deal, hints that the US will abandon the Intermediate-Range Nuclear Forces Treaty or threats to impose new economic punishment on those players who prefer to agree to disagree with the crumbling hegemon.

According to Stratfor, the great power rivalry with China and Russia pushes the United States to downgrade its military commitments in Africa and the Middle East.

It’s been pointed out that a decade ago Beijing was in no position to claim the role of world leader, thus challenging the US. But these days things are different, as China is full of determination and economic power, and it will be satisfied with the place of the second world economy. There’s no telling who till take the upper hand, but this rivalry creates preconditions for a perfect storm.

Yet another factor is the the Fed’s raising key rate for the first time since 2014. This means that money becomes more expensive. Thus, the Fed is preparing to become a beneficiary of the crisis, along with those powerful and wealthy people who will be buying bonds at about half the price at the height of the crisis.

It’s hardly a secret that during the global crisis salaries are slashed in half, while price tags in stores are rising, employees are being laid off, housing prices are falling, loans are getting more expensive. But this time around we may as well add public widespread public disobedience, riots, mass looting, revolutions and military conflicts plunging a number of continents into chaos.

It’s been pointed out that the era of largely uncontested US primacy fades. Тhe so-called international order based on the so-called rules has been thrown into turmoil. Instruments of collective action, such as the United Nations Security Council are undermined, while those of collective accountability, including the International Criminal Court have all but lost all credibility.

For the year ahead of us, various political experts predict a rapid exacerbation of differences between the United States, China and Europe and Russia. The already dire situation in such countries as Yemen, Afghanistan and Ukraine can rapidly go from bad to worse. We can expect the United States, Saudi Arabia, and Israel launching military aggression against Iran, due to the continuing deterioration of the situation in the Middle East. Things don’t look any better for Africa and Latin America too.

It didn’t take long for trade wars, cyberattacks, shifting defense strategies and arms races to convince the world that this is the new and uncomfortable global reality. However, the main danger of today’s age of uncertainty is that the race to the bottom may turn out to be a long one.

Jean Périer is an independent researcher and analyst and a renowned expert on the Near and Middle East, exclusively for the online magazine “New Eastern Outlook“. 

https://journal-neo.org/2019/01/24/brace-for-impact-global-financial-crisis-is-just-around-the-corner/
https://journal-neo.org/2019/01/24/brace-for-impact-global-financial-crisis-is-just-around-the-corner/